Indian fund flows are dealt with more carefully: Mauritius

Often accused of being a conduit for black money to and from India, Mauritius has said it is "extra careful" when dealing with fund flows involving Indian entities, as compared to those from other countries.

Besides, Mauritius is more than eager to share details with India about persons and companies suspected of financial irregularities and complies with all such requests, except those found to be 'fishing expeditions' or involving legal implications, the country's financial regulator has said.

"All request for information sent by India, not only regarding the securities market but also vis-a-vis banks, are replied to, because India gets top priority for Mauritius," the country's securities market regulator Financial Services Commission's CEO Clairette Ah-Hen told PTI in an interview.

"There are special conditions, which we have named 'Indian Conditions', for funds found to be linked to entities of Indian origin both in terms of inflows and outflows through Mauritius," the FSC chief executive during her India visit.

These 'Indian Conditions' are applied in terms of licensing of the entities operating through Mauritius, the undertaking asked from them and the documents required to be submitted to various authorities.

Breach of these 'Indian conditions' leads to revocation of license, while non-submission of auditor certificate regarding compliance with these conditions leads to Tax Residence Certificate not be recommended and the company becoming eligible for tax benefits under DTAA (Double Tax Avoidance Treaty) between the two countries.

As per FSC's Indian Conditions, non-compliance with the undertaking also leads to revocation of the licence, Ah-Hen said.

If a Mauritius-based Global Business Company becomes India-related (that is shareholders are of Indian origin or the investments are routed to India) even after getting licensed, the Indian conditions and the related undertakings are imposed on that entity.

The FSC Chief said that the rules and regulations are very strict in the country and the companies or funds with Indian links are handled with extra caution, given the importance accorded by Mauritius to India.

"We are much more serious when funds are going to India ... If the funds are going to say China or Africa, we do not have to do that. But, there are special conditions for India and we make sure that these are fulfilled," she said.

Ah-Hen said officials touch base with Indian authorities such as RBI, Sebi and others, as the case may be, whenever it comes across any suspicious information.

"If there is a suspicion, we give India more importance than any other countries. And investors (global entities routing their investments through Mauritius) know it because it is all written in conditions for their setting base in Mauritius," she added.

The country's financial services industry body Global Finance Mauritius (GFM) CEO Nikhil Treebhoohun also sought to dispel the perception that Mauritius does not respond to the queries made by India with regard to round-tripping and other irregularities and said all such requests are always complied.

Treebhoohun, who was accompanying the FSC Chief on her India visit, said that all the information requests made by India have always been replied to, except for a few that are either 'fishing expeditions' or those against the rules of the country.

Mauritius' Board of Investment Assistant director Harvesh Seegolam said that these replies have always been made in a timely manner.

"This is done in very timely manner. We are among the very first country that has welcomed an Indian tax official.We have an official from Indian tax department based in Mauritius," Seegolam said.

Ah-Hen said that foreign investors select Mauritius for routing their investment to India because of the good relationship between the two countries.

The officials stressed that Mauritius' competitiveness should not be undermined when it comes to renegotiating the treaty with India, referring to the new Tax Information Exchange Agreement being worked out between the two.

They, however, said that the existing DTAA between the two countries was good enough to take care of all the concerns, including those related to round-tripping and money laundering.

Asked about the reports that hundreds of the companies making foreign investments (through FDI and FII routes) sharing same address have raised concerns about lack of adequate controls in the country, they said that the situation was not as perceived to be.

They said that Mauritius has a system of the companies listing a registered office and a business address in their official documents.

While the business address is for their operational purposes, the registered office address of most of the global business entities is generally that of registrar of the companies of Mauritius, thus giving an impression that all of them share the same address, they added.

They, however, admitted that there has been lack of communication in this regard to create such a perception.

Listing out the importance of financial services sector in the country, Treebhooum said that the industry employs nearly 12,000 qualified people and many of them are Indians.